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EU Microsoft ruling will set tone for the future

When Europe's second-highest court rules Monday on Microsoft Corp.'s appeal of its landmark antitrust conviction, more will be at stake for regulators than just the behavior of the world's largest software company.
/ Source: The Associated Press

When Europe's second-highest court rules Monday on Microsoft Corp.'s appeal of its landmark antitrust conviction, more will be at stake for regulators than just the behavior of the world's largest software company.

Experts say an affirmation of the European Commission's 2004 order and record 497 million euro ($613 million) fine could embolden regulators as they pursue probes of Intel Corp., Rambus Inc. and Qualcomm Inc., among others.

But a major victory for Microsoft could turn the regulatory landscape upside down, curbing the ambitions of European officials who have recently taken a more aggressive stance against alleged monopolists than regulators in the United States.

The 13 judges on the Luxembourg-based Court have been considering Microsoft's appeal for 15 months. Judge Bo Vesterdorf — on his last day on the job — will read the order that could change how the world's most powerful corporations are regulated by Europe.

The case started in the 1990s with complaints from Microsoft rivals about how the software giant used its presence on most desktop computers to elbow into new markets and block competitors. It's also always been about something more — nothing less than the role of Europeans in the regulation of U.S. companies.

( is a joint venture of Microsoft and NBC Universal News.)

If the Commission's tougher approach is upheld, that means U.S. companies with a global presence will have to conform to Europe's rules, said Keith Hylton, a professor at Boston University School of Law.

"The end result is, the EU ends up being the global regulator of dominant firms," he said.

Both sides can appeal the decision Monday to Europe's highest court.

The case, which originated from a 1998 complaint by U.S.-based server maker Sun Microsystems Inc., has become a classic David and Goliath tale. Here, however, both sides claim the role of David.

EU regulators say they're battling a corporate bully that stifled competition and used its Windows monopoly to muscle in on new markets — media players and servers. A similar U.S. Department of Justice case against Microsoft was settled in 2002.

Microsoft counters that it's the one being bullied by regulators who imposed heavy fines and buried the software maker under reams of criticism without suggesting specific remedies for their complaints.

On March 24, 2004, the European Commission found Microsoft guilty, ordering it to share the code that would help rivals' servers work well with Windows and make a version of its operating system available without its media player software. It also levied the record-setting fine.

How much Microsoft has complied with the code-sharing order is still up to debate. Last year, it was fined an additional 280.5 million euros ($357 million) for failing to supply the "complete and accurate" interoperability information. Microsoft has said it will appeal that decision.

The company also offered a version of Windows without its Media Player — a year and a half after the initial ruling. The software designed by EU lawyers was a total failure. No computer makers bothered to ship it with new PCs.

The case is about "whether or not the state can force a company to provide its research and development to its direct competitors at little or no cost," said Microsoft lawyer Erich Andersen.

EU spokesman Jonathan Todd said Microsoft does not have the right to exclude competitors "without constraint." By selecting who gets to play in the market, "Microsoft wants to make those choices for the consumer," he said

But a ruling in favor of Microsoft would have implications far beyond the current case, said Ted Henneberry, a lawyer in Heller Ehrman's London and Washington, D.C. offices and a former member of the Irish competition authority.

"There is an issue as to what the Commission's abilities are to restructure markets," he said. "This will set the bounds" for how aggressive the EC can be in regulating technology companies.

It's a question that applies to many more companies than just Microsoft.

In July, EU regulators charged Intel Corp. with monopoly abuse for allegedly offering customer rebates and below-cost pricing. They said Intel's actions undercut smaller rival computer chip-maker Advanced Micro Devices Inc.

Last month, the Commission charged Rambus Inc. with antitrust abuse, alleging the memory chip designer demanded "unreasonable" royalties for its patents that it said were fraudulently set as industry standards.

And it's also pondering further moves on Microsoft and its new Windows Vista operating system as well as investigating complaints about Qualcomm Inc.'s licensing fees for cell phone chip patents.

Ultimately, though, Microsoft isn't the same company it was in the 1990s, said Matt Rosoff of independent consultancy Directions on Microsoft. Today, it's an aging octopus struggling to match Google Inc. on Internet search and Apple Inc. on music players.

"Microsoft is not perceived as the all-powerful giant it was ten years ago," he said. "It's a combination of rapid change in the technology industry, the natural life cycle of any company growing and maturing."